HI 00208.080 Role of Professional Standards Review Organizations (PSRO's)

The Social Security Act provides for Professional Standards Review Organizations (PSROs) “in order to promote the effective, efficient, and economical delivery of health care services of proper quality.”

PSRO’s are responsible for reviewing services (and items) for which payment may be made under the Act. The purpose of PSRO review is to determine whether or not: (1) the services are or were medically necessary; (2) the services furnished or proposed to be furnished on an inpatient basis could, consistent with the provision of appropriate medical care, be or have been effectively furnished on an outpatient basis or more economically in an inpatient health care facility of a different type (i.e., determining whether services are or were appropriate; and (3) the quality of the services meets or met professionally recognized standards of health care (i.e., determining whether services are or were of acceptable quality).

Thus, where a PSRO has assumed binding review responsibility, it is responsible for both the initial and reconsideration determinations with respect to the medical necessity, appropriateness, and quality of care of services.

PSROs may also be utilized, where appropriate, by the Secretary for purposes of professional consultation in the exclusion or termination of physicians or other suppliers of health care goods or services. If a PSRO determines that a physician or other supplier of health care goods or services is guilty of abuse against the Medicare or Medicaid programs, it is required to report this to the Centers for Medicare & Medicaid Services (CMS) for the imposition of whatever sanctions are appropriate. In addition, PSROs are available to advise CMS or the Medicare contractors as a peer review body with respect to potential overutilization of services, unnecessary services, or services of generally inferior quality.

Where PSROs have implemented binding review authority, the utilization review condition for a facility’s participation in the Medicare or Medicaid program is superceded by the PSRO assumption of review. Consequently, the State agency survey of the utilization review activity, discussed in HI 00208.075 B is eliminated. In addition, once a PSRO has binding authority, it is the only entity able to certify services as medically necessary for purposes of Medicare or Medicaid payment. Any initial appeal of a PSRO denial must be directed to the PSRO.